Making an informed decision

Small business owners face multiple moving parts, new rules in shopping for health plans.

Beginning in 2014, the Affordable Care Act requires that all fully insured non-grandfathered health plans offered in the individual market and by small employers — either on or off the exchange — cover a core package of essential health benefits that include items and services within the following 10 broad categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; pediatric services, including oral and vision care; preventive and wellness services and chronic disease management.

Under the law, each state must establish its own set of essential health benefits based on a benchmark plan that reflects the scope of services offered by a “typical employer plan.” All plans must offer benefits that are substantially equal to the benefits in the benchmark plan, which in Iowa the state has selected as Wellmark’s Alliance Select Copayment APlus PPO. These plans must also include supplemental coverage of pediatric oral and pediatric vision services.

Is your health insurance plan grandfathered? Are you staying with Wellmark Blue Cross and Blue Shield? Switching providers? Not offering insurance to your employees now, but considering it? Depending on your situation, here’s what you need to know about why rates are up or down this year, and what they could be doing in the future.

New ways to shop

Under the provisions of the Patient Protection and Affordable Care Act, small businesses will have a new means for shopping for coverage known as the SHOP (Small Business Health Options Program) Marketplace. Originally expected to go online Oct. 1 along with the individual marketplace, the SHOP Marketplace launch date has been pushed back twice, and the site is now anticipated to become available by the end of this month, leaving little time to use it to shop for 2014 coverage.

Additionally, several insurers and brokerages have launched so-called private exchanges that will offer small employers menus of coverage options along the lines of a defined contribution plan. Locally, Mercer LLC and LaMair-Mulock-Condon Co. are each offering private exchanges that have begun enrolling companies.

Meanwhile, the cost of health insurance continues to climb for small employers throughout the United States, according to a nationwide survey released in October by the National Federation of Independent Business. Sixty-four percent of NFIB-member employers that responded to that survey said health premiums for their current coverage increased last year while 29 percent indicated there was no change and 6 percent saw declining premiums. Nationally, the median cost increase was about 6 percent, though the average increase was closer to 12 percent, NFIB found.

Cliff Gold, founding director and chief operating officer of CoOportunity Health, said the ability to shop for competitive rates on the online SHOP exchange will provide a tremendous benefit to small businesses. CoOportunity Health will offer policies for small businesses both on and off the marketplace.

“The health insurance market has been a black box,” he said. “That the market will be more transparent in the future is welcome and something that will benefit small businesses. ... We welcome a playing field in which we’ll be equal with Wellmark.”

Presently, however, the technical problems with the online marketplace only further delay the ability for small businesses to shop and make comparisons, said Wayne Reames, a Belin McCormick P.C. attorney whose expertise includes health care law.

Additionally, if healthy young adults who are currently uninsured don’t sign up for coverage, “the costs of obtaining an exchange policy must increase, and therefore make employer-provided insurance relatively more attractive,” he said.
New rules: younger isn’t necessarily better

Small employers have always been subject to greater fluctuations in their group health insurance premiums than larger groups, because gaining or losing just one healthy or unhealthy worker can make a big impact on the group’s overall risk.

That volatility is expected to moderate somewhat in the coming year. New requirements under the Affordable Care Act will result in a more compressed rating structure for determining premiums, which will mean smaller differences between high-cost and low-cost groups, said Steve Flood, senior vice president of employee benefits with Holmes Murphy & Associates Inc.

“The rule of thumb is that if the group had historically been on the high end of the rating scale, they’re getting lower increases now,” he said. “But the groups with younger members are having higher increases. I looked at one younger group today that had a 20 percent increase.”

Beginning in January 2014, insurers will no longer be able to rate policies based on health status or gender, meaning that neither of those risk factors can be taken into consideration in calculating premiums. That restriction could help lower premiums for less healthy groups but work against healthier groups.

Unlike large groups, groups of fewer than 50 employees that choose to provide insurance will be required to provide coverage for “essential health benefits,” as well as meet the “metallic tier” standards of bronze, silver, gold or platinum plans similar to those that will be required for individual plans. Under a bronze plan, a carrier will pay 60 percent of claims costs, compared to 90 percent coverage under a platinum plan.

Grandfathered vs. non-grandfathered

A provision of the Affordable Care Act enabled employers to “grandfather” the health care plan they had in effect prior to the law’s passage in March 2010. Wellmark’s chief financial officer, David Brown, estimates that approximately 30 percent of small group plans his company covers have maintained their grandfathered status, while the remainder are no longer grandfathered.

“Not every insurance carrier in the country kept grandfathering, because the government made it challenging to grandfather people in,” Brown said. “We felt it was worth the effort because we wanted, to the extent possible, people to keep the plan they had if they liked it. But over time, and this is even more true for small groups than it is for individuals, they’ll want to make some changes to the co-pays, deductibles.”

Among those small groups whose plans are no longer grandfathered, their new plans for 2014 could be much pricier, Brown said.

“For some groups, especially those that have a lot of healthy, younger employees, that new plan will probably be significantly more expensive than the plan they have today,” he said. Conversely, “if you had a plan that was relatively rich and had a number of older, less healthy employees, you’re probably seeing a decrease in price on that plan.”

The new ACA-compliant plans will be more costly in large part because they’re required to provide the mandatory essential health benefits coverage.

Grandfathered plans could also see double-digit rate increases in some instances, if they had unfavorable changes in their workforce that increased their risk.

According to Wellmark, the percentage increase a group can get from a worsening risk level is capped at 15 percent by the Iowa Insurance Division. However, the company said it follows a stricter rate increase cap of 12.25 percent. When rates decrease to improved risk, however, there is no downward limit by the state or Wellmark cap on rate decreases, spokeswoman Traci McBee said.

When additional factors such as demographic changes in the group are added in, the possible rate changes are broader, however. With those factors included, some small businesss had increases from Wellmark as large as 20 percent, but also decreased by as much as 30 percent for other groups.

In the case of a very small group, such as a family business with two brothers in their 60s and their two sons in their 30s, replacing just one person with an older or younger employee, would substantially shift the group rate up or down even if no other factors change, McBee said.